Major Allergan shareholder dumps stock in vote of no confidence

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Capital Research and Management has sold most of its 6.3% stake in Allergan, best known as the maker of Botox.

Capital Research and Management met with Allergan’s CEO, David Pyott, before making the final decision to sell.

The general consensus is that Capital Research did not see Allergan’s stock price going beyond the latest offer from Valeant, valued at $53 billion.

Dive Insight:

Capital Research and Management, an LA-based mutual fund, manages $1.2 trillion in assets. The company’s recent sales of Allergan stock suggests that it does not see the stock price going higher than Valeant’s latest offer for the Botox maker, which translates into $173.24 per Allergan share. David Pyott, CEO of Allergan, has not changed his position regarding Valeant’s offer. Allergan contends that Valeant's offer is too low and that their business model is unsustainable.

Valeant is aligned with Bill Ackman’s firm, Pershing Square Capital Management, LP, which owns almost 10% of Allergan’s share. Though Allergan does have some shareholder support, as well as some active institutional buyers, the threat for this company in light of the recent sell-off by Capital Research is that potential buyers may support Valeant’s position and tip the balance in its favor, bolstering the chances of a takeover.

Allergan is not going out without a fight, though. The company announced on Monday that it plans to eliminate approximately 13% of its workforce and slash R&D funding in an effort to demonstrate its ability to maintain profits while remaining independent. Valeant executives have said they would pursue similar strategies if the company were to acquire Allergan.